Why ending favouritism is the key to building a diverse workforce – Financial Times

The author is an associate professor at the London School of Economics and founder of the LSE’s Inclusion Initiative, which focuses on creating inclusive workplaces

Can diversity bring better outcomes in business? The lazy answer is simply “yes”, given the question is so complicated. The truth is that diversity is linked to better business outcomes, particularly when the job involves innovation, creativity and the assessment of risk: think investment banking, asset management and venture capital. This article, and my wider work, focuses on diversity in these sectors and in professional services.

I see again and again that the battle that still needs to be won internally in organisations is that of eliminating favouritism. In practice, this means those with closest affinity to their manager get the biggest share of opportunities, visibility and voice. Winning the favouritism battle will close unexplained pay gaps and boost senior leadership roles for under-represented talent.

Many financial services firms are, in fact, at the leading edge of recognising and stopping favouritism. They recognise there is a business advantage to employing and promoting staff from diverse backgrounds.

The most common blocks to progress we see are mediocre managers of all genders who refuse to embrace the idea (explicitly, or covertly) that diversity matters.

To get any benefit from diversity, one thing is absolutely key: inclusive leadership. This is a jargony word thrown around by senior leaders who want to look good, but the practical aspect of it is that truly inclusive leaders are visible by their actions.

An inclusive leader will make sure that all voices in the team are heard, and will make efforts in the recruitment process to find the diversity that is missing from their organisation. They do it to give their team an edge, and themselves access to a bigger bonus. Finding diverse talent is harder in some sectors than others, but it can be done. I have been in many conversations with private equity leaders, for example, where they bemoan the sector’s “lack of a diverse talent pipeline” as the cause of its dismal diversity statistics. The facts don’t back them up.

Progress in private equity is possible, but it takes effort. KKR, for example, recruits with the help of organisations such as Level 20, a non-profit aiming to create better gender balance in the sector, and the 30% Club, which seeks to promote more women into top jobs.

Johannes Huth, Partner and Head of KKR for Europe, stands on stairs at his office
Johannes Huth, partner and head of KKR Emea, says the company is committed to diversity because it is good for business © Charlie Bibby/FT

Johannes Huth, partner and head of KKR Emea, says: “Cultivating partnerships with organisations that connect us with under-represented talent allows us to hire the best, because we are tapping into wider pools. KKR is committed to diverse representation simply because it is good for our business.”

These actions pay off: KKR’s diversity statistics show that one in four senior executives globally are women, and women make up 44 per cent of its workforce. KKR is prioritising expanding women’s representation at the top, as well as at the start of the pipeline.

To retain under-represented talent at all levels, everyone needs equal opportunities to progress. In 2021 I wrote a “Good Finance” framework, on behalf of the UK membership group Women in Banking and Finance. This offers practical actions that a company can take to ensure that it retains and develops talented employees in a manner that benefits the firm.

The women I interviewed for the report told me that one of the biggest blockers for them was that their managers were not passing on the opportunities that could lead to visibility and promotion. Inclusive leaders can fix the manager “block” by paying attention to how projects and events are distributed. Note the distinction between “promotable tasks” (meeting a new client) and “non-promotable” (organising a colleague’s farewell drinks).

One often-overlooked point is that diverse talent should not be forced to conform to the perspectives already held by their colleagues. If they are not listened to — or even actively shouted down — the firm is losing crucial insights. The endless drive to consensus-based decision-making is a scourge on innovation, which only happens when outlier ideas are allowed to breathe. Consensus-based decision making is also the thing that most often silences under-represented talent. Endless battles to be heard require mental muscle that most humans find hard to develop.

Too often, women and people from minority groups leave, or adapt to the status quo — to the detriment of the firm.

Meetings are crucial in terms of gauging whether all colleagues are encouraged — or go unheard. Gorm Thomassen, chief investment officer and co-portfolio manager of the AKO European fund, a hedge fund, says: “Anytime I bring colleagues into a meeting I do not want to waste their time. I am vigilant to the dynamics and make sure that every voice is heard. For me this is the foundation of inclusivity: hearing the views of every person in the room.”

Role models among senior management are important. Marcus Satha, global head of short-term interest rate trading at Citi, took six months’ parental leave. Afterwards, “the number of men and women in my business who took [it] skyrocketed, as it challenged industry norms,” says Satha. “In particular, it was a welcome relief for many female traders who were anxious that having children would adversely impact their career. I’ve found that my team is more open and engaged, they know I’ll support them through their personal challenges and life events, which has significantly improved loyalty and motivation on the desk.”

None of these actions are enough to guarantee real change. Only rigorous ongoing evaluation will make sure the results are long-lasting. KKR and Morgan Stanley track progress with data. This evaluation stage is vital, but not enough companies do it. As an academic working with financial services organisations I have found that there is a tendency for human resource departments to create diversity initiatives that are “best practice”, or where they have a feeling that they will create change. These initiatives are rarely evaluated for effectiveness in any meaningful way, suggesting that millions of dollars globally may be funding initiatives that are creating zero lasting change, or may even backfire. These in-house missteps may be compounded by bringing in external diversity consultants who roll out their initiatives (and then leave).

Data tracking and evaluation is the final piece of the diversity puzzle — and it’s absolutely key. It is the only way that any organisation is going to ensure and accelerate the progression of under-represented talent.

Diversity initiatives: how not to do it

Five areas that may be ineffective or not targeted correctly in your organisation.

1. Unconscious bias training: An afternoon of training is not going to reprogramme biases that are cultivated over a lifetime.

2. Mentorship without access: Under-represented talent tends to be over-mentored. It is beyond patronising to be talented and ambitious and be given a mentor who does not provide opportunities and access to their networks.

3. Grievance channels: Human resources departments have in the past sometimes made things harder rather than easier for victims of discrimination and isolation. These systems in your organisation may need an overhaul.

4. Managers: Under-represented talent often gets held back by mediocre managers. In-house training currently offered to managers largely does not enable them to be inclusive leaders.

5. Pipeline problems: Many organisations have early career pipelines for diverse talent. Without similar targeting of mid and late career professionals, a lopsided power structure emerges and the voice of under-represented talent gets lost — none of them are senior enough to be heard.

Spread the love

Leave a Reply

Your email address will not be published.